Correlation Between AECOM TECHNOLOGY and Evolution

Can any of the company-specific risk be diversified away by investing in both AECOM TECHNOLOGY and Evolution at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining AECOM TECHNOLOGY and Evolution into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AECOM TECHNOLOGY and Evolution AB, you can compare the effects of market volatilities on AECOM TECHNOLOGY and Evolution and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in AECOM TECHNOLOGY with a short position of Evolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of AECOM TECHNOLOGY and Evolution.

Diversification Opportunities for AECOM TECHNOLOGY and Evolution

-0.2

Correlation Coefficient

AECOM TECHNOLOGY  Evolution

Good diversification

The 3 months correlation between AECOM and Evolution is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and AECOM TECHNOLOGY is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on AECOM TECHNOLOGY are associated (or correlated) with Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution AB has no effect on the direction of AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and Evolution go up and down completely randomly.

Pair Corralation between AECOM TECHNOLOGY and Evolution

Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to generate 0.7 times more return on investment than Evolution. However, AECOM TECHNOLOGY is 1.42 times less risky than Evolution. It trades about 0.04 of its potential returns per unit of risk. Evolution AB is currently generating about -0.03 per unit of risk. If you would invest  7,892  in AECOM TECHNOLOGY on October 26, 2024 and sell it today you would earn a total of  2,408  from holding AECOM TECHNOLOGY or generate 30.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AECOM TECHNOLOGY  vs.  Evolution AB

AECOM TECHNOLOGY

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, AECOM TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AECOM TECHNOLOGY and Evolution

The main advantage of trading using opposite AECOM TECHNOLOGY and Evolution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AECOM TECHNOLOGY position performs unexpectedly, Evolution can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Evolution will offset losses from the drop in Evolution's long position.

The idea behind AECOM TECHNOLOGY and Evolution AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.